U.S. Dollar: The Trade of the Decade 31 comments
-
Font Size:
-
Print
- TweetThis
It's official. The greenback is back!
Why would I say that when everyone is calling for its collapse? I mean after Helicopter Ben all but sent the greenback over the edge by cutting the fed funds rate to zero, why would anyone own anything but gold?
The U.S. dollar has been in steady decline since the mid-eighties. And the U.S. currency has been cratering since 2:15 EST on Tuesday, December 16th. Everyone expects the Federal Reserve and Treasury to print the economy out of recession, but this is where I get off the bus. Sometimes the most obvious trades are the most dangerous, and this is a very crowded trade. Commodities and bank stocks are both getting plowed under. If printing money was in play, can someone explain the carnage in commodities?
What about that decoupling trade? You know, the China and India growth story? This will be the decade we find out that we all are very coupled together. Deleveraging is synonymous with deflation, and credit does equal money.
The truth of the matter is that Uncle Ben is the buyer of last resort. But by my simple calculations, he likes to buy on the cheap. This is not a runaway train at all, but a very calculated, systematic and coordinated reversal of a twenty year down cycle in the dollar. Contrary to many experts, the Treasury is NOT highlighting a risk trade. Whatever the Bernanke Fed buys will appreciate in value, and you can take that to the central bank!
The U.S. dollar is taking its spot as the reserve currency. America is coming back riding on the greenback. Many pundits have written off America and its currency, but I challenge everyone to buy the pullback in the dollar.
Has anyone ask Hank Paulson if the U.S. has a strong dollar policy lately? Why? It's obvious, isn't it.....or is it? America is the biggest bargain in the world. And we are going to see commodities under serious pressure for ten years. People will laugh at oil projections of $200-500 a barrel. America is moving into a savings mode, and the rest of the world is going to learn just how coupled they were with the U.S. We are embarking on a new world of alternative energy programs the world will envy. Shock and awe will be the mantra for green technologies. And making do with less will be the new cool trend. Our markets will remain open, but we won't be buying trinkets from Asia or oil from the Middle East. We will be buying all things, which make our lives productive.
America, the beautiful, your turn to shine is at hand. The U.S. dollar, front and center, will be the beacon of financial integrity. The rogue entities will be rooted out and destroyed. The cleansing has begun, and America is on the mend. The rumor of America's demise has been greatly exaggerated, and the U.S. dollar will reflect the imagination and heart of America. The UUP and SPY will be excellent decade long trades.
Disclosure: no positions in UUP or SPY
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
David Fry
-
2
TraderMark
-
3
Don Dion
-
4
Cliff Wachtel
-
5
Mike Havrilla
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This article has 31 comments:
While your article is long on sentimental clap-trap, there is virtually no substance to your thesis and absolutely no back-up. Arguments from authority carry little weight around here, especially when the authority is yourself!
Show us the research; we can draw our own conclusions from it!
On a serious note, some of the TA in Seeking Alpha articles is often the best commentary around. Please don't dilute that analysis with drivel like this
The reason the dollar has declined for the past 20 years is our debt load has been increasing during that time. How's the debt load been in the past few months?
Having to pay back all our national debts with deflated dollars is toxic and will be avoided at all costs regardless of what talking government heads say about a strong dollar policy.
Hmmm.....dollar up gold down/even. Clearly market manipulation by the Fed
and Banks. Once gold explodes Joe six-pack will finally realize the jig is up.
As for the dollar being a solid investment....were you dropped as a child, perhaps on your head repeatedly?
i've always felt (since i started thinking about currencies, not that long ago) that we (small investors/traders) were pawns and witnesses to the first ever global chess match
and much as i lean w/ron paul, that the fed is our main problem domestically, the fed is the dollar (or some currency of our own) and the real battle was between the dollar and the other world currencies
something of what you say speaks to me as bearing a bit of truth
we'll see :-)
ps - doesn't mean i think gold/silver will end up tanking; after all, who has the most gold reserves in the world, the u.s. (us)
BUWHAHAHAHAHAHAAHA
Hey buddy after you fail as an economic analyst maybe you could start a career as a cheerleader. Your article has absolutely nothing to back it up. And worse yet you're a couple weeks too late. If you at least wrote this during the dollars bear market rally, it may have been somewhat believable.
And by the way, alternative energy , energy efficiency, recycling etc. does exist in Europe for about 20 years, the US is way behind the curve.
EVERY ONE is bearish on the dollar. There are no contrarians.
If everybody believes.......... ?
Your already behind the game as far as I can see, the failure to sign up to Kyoto for so long, an administration that was built on oil and not to serious about alternative energy, have led to a wasted decade that others have spent initiating some achievable targets and developing some exciting technologies.
Israel have announced that they will have the entire country running electric cars by 2020. Norway is aiming for Zero-carbon Status by 2050- a figure that is likely to adopted EU wide, at least for the richer countries.
Iceland although in other trouble, have 90% of there domestic electricity needs coming from geothermal sources and intend to start using that clean energy to produce hydrogen.
I'm afraid I find it difficult to see such actions being taking by a country that is in my opinion in serious economic difficulties. The greenback is in for a bumpy ride and we shall see just how green President Obama will be when push comes to shove.
You are talking about future appreciation in the assets the Govt is buying (Uncle Sam is buying on the cheap) and then in the immediate paragraph afterwards you are talking about deflation, crashing commodities prices and a stong dollar and savings rate.
Write a new article when you start making sense and stop contradicting yourself. Oh, and can you sell me some Yuan futures vs. the Dollar. I cannot buy them as a small investor in the currency market becuase of restrictions but if you are so eager, then maybe we can trade off the books.
The dollar as reserve currency and a beacon of financial ntegrity?
"Credit does equal money"?
Come now, your euphoric declamations are a bit intoxicated to say the
least! With a fiat currency being devalued to the lowest level possible
(unless helicopter Ben takes the interest rates down to minus something!) gravity will put the dollar, which has absolutely no economic
fundamental legs to stand on down, down, and further down!
I am also inclined to agree with Mr. Robert Prechter, credit is not money!
The present 'freeze' in the credit markets is the result of the credit in-
flation that went on unabated for so long.
You know, on your spare time you should grab a couple books by Jerome F. Smith, Robert Prechter, Peter Schiff, and one that would
problably really clear your clogged sinuses, Ludwig Von Mises!
Have a prosperous (I hope) holiday season!
EDT
Chicago, Illinois
I've been trying to think through the broad implications of your strong dollar/weak commodities arguments. By the way, UBS came out today with a similar projection of oil at $20 and gold at $300 next year.
My conclusion is that the whole question hinges on whether or not Uncle Ben, backed by The Fed and Treasury and our singing printing presses, can pull off a global refinancing deal. It has to be a global solution because everything is so interconnected.
The US has been the global growth engine for the rest of the world for decades. China, India, etc. may be developing their own internal demand structures, but their economic growth is still tied to exports, principally to the US. They need to keep our consumption engine going or their production engine shuts down. If demand/production falls, they lose jobs, and their unemployed population won't have money to buy cell phones or pay taxes to build roads and new factories.
The producing nations are already getting hit harder than anyone expected, due to falling consumption in the US and Europe. Look at Brazil, Australia, to see some of the impacts of falling oil and metals prices. These were very strong economies, now having to scramble.
The point is, none of these countries can survive for long economically without foreign capital coming in to buy their goods and services. That's how they keep their people employed and roads paved. Govts fear high unemployment more than anything else. They can control food prices and gas prices somewhat, but having too many people standing around with nothing to do foments riots and coups. Look at Obama's plan. Step 1 is to create 2.5 million jobs. Get people working, off the streets, and off welfare.
So, Uncle Ben needs a strong dollar to support all those foreign govts holding gigantic piles of dollars and treasuries, and they need to continue buying our low-yield debt so we don't go under. They buy our junk money so we can keep buying the junk products their huge populations produce. It's a delicate balancing act, on a global scale.
It's pretty clear that the dollar's fundamentals are crap. The only way you could get the dollar to look strong while you are creating billions more of them out of thin air is by concerted actions across the world. Nobody can afford to rock the boat too much because they all realize, if the dollar crashes, the US crashes, and every other economy in the world crashes right behind us.
Finally, you can't have a strong dollar if oil and gold are going up. We already know that oil futures are manipulated by traders (primarily the big banks who are market-makers), and I suspect Uncle Ben and the NY Fed are pulling some strings to keep the spot price low. How else could you get "demand" still falling when the price is cut by two-thirds? "Gee, I'm just gonna leave my big new SUV sitting in the driveway." Sure!
Gold is another case. Demand is surging, but the big depository banks (the same guys "fixing" oil prices) are hoarding the physical metal. Spot price $800 - here, have this certificate (IOU) for an ounce. You want actual gold? Go to a dealer. Of course, he'll charge you $1100 an ounce. The spot gold price is being artificially pressured, perhaps again to support the appearance of a strong dollar.
So, I think it is entirely reasonable for Uncle Ben and his local and global cohorts to be manipulating commodities, and many other aspects of daily life we take for granted, to support a strong and rising dollar. It's a very fine line they're walking, with global disaster hanging on every step. Can they pull it off? It seems to be working so far, but I still only give it about a 30% chance of success. Every new bailout, every new pile of money they throw at it, makes the fine line thinner and thinner.
The other 70% of me says it's all going to fall like Humpty Dumpty one of these days. I'm learning how to grow carrots in my back yard.
You should change your last name to Madoff or Ponzi. You seem to have the talent to be a conman.